House down payments may rise steeply
By Zheng Lifei (China Daily)
Updated: 2006-05-12 08:52
The central bank may raise housing mortgage down payments dramatically in a
bid to cool down the red-hot property market.
The People's Bank of China
is mulling over a new mortgage policy to curb housing price hikes; and could
raise the amount from the current "20 per cent to 40 or 50 per cent,"
reported 21st Century Business Herald yesterday, quoting "a well-informed"
source.
The newspaper did not make it clear if the top rate would apply
only to such sectors as luxury housing or second properties; or whether
low-price housing would fall in its ambit.
The central bank refused to
comment on the report.
Analysts and economists agree that the central
bank might take further measures to rein in the property prices but expressed
scepticism over such a hefty rise in down payments.
"It is quite unlikely
that the central bank would raise the down payment by such a huge margin," said
Yi Xianrong, a research fellow at the Financial Research Centre of the Chinese
Academy of Social Sciences.
"It is sound if the level is raised to 30 per
cent. The current 20 per cent threshold is low," said the
researcher.
According to official statistics, property prices in 70
large- and medium-sized Chinese cities rose an average of 5.5 per cent in the
first quarter from the same period in 2005, prompting many to call for strong
government action to curb the trend.
The Beijing Construction Committee
on Wednesday issued a regulation, to be effective June 1, stipulating that
property developers that hold back on new houses to reduce supply in expectation
of higher prices will not be allowed to sell new houses for at least one
month.
But some critics say such measures will lead to the market further
tilting to the supply side, and the real burden would fall on
homebuyers.
House prices in Beijing surged around 1,000 yuan (US$124) per
square metre in the first two months of this year, up 17.3 per cent from the
same period last year, according to the Beijing Construction Committee.
"A particularly large share of new lending in the first months of 2006
went to real-estate developers," the World Bank said in its latest economic
update on China.
"Bank credit for real estate development jumped,
absorbing about half of the total credit growth in the first two months of
2006," it said on Wednesday.
The central bank raised its benchmark
one-year lending rate by 27 base points to 5.85 per cent last month, a move that
was widely seen as to slow down the sizzling economy, which grew 10.2 per cent
in the first quarter.
"It is expected that the central bank will take
further steps to finetune the economy," said Li Yongsen, an economist with
Renmin University of China.
"But what measures it will take, be it rate
rises or down payment hikes, will depend on the market feedback from the rate
rise last month," Li said.
The Chinese-language International Financial
News reported yesterday that in its recently-issued 2006 credit guidance for
Shanghai, the central bank's Shanghai office recommended that real
estate-related credit supply continue to be heavily regulated.
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